Mixed news from pub and restaurant giant Mitchells & Butlers

Picture Alan Watson. Toby Carvery, Strathclyde Park
Picture Alan Watson. Toby Carvery, Strathclyde Park
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Mitchells & Butlers, the restaurant and pubs giant behind a host of brands including All Bar One, Browns and Toby Carvery, has vowed to press on with its efficiency drive after booking a fall in profits.

Full-year results yesterday revealed a fall in pre-tax profits to £77 million for the year to the end of September, compared with £94m a year earlier. That was despite higher revenues of £2.18 billion, up from £2.09bn.

The group, whose other brands include Harvester, O’Neill’s and steak chain Miller & Carter, said full-year like-for-like sales rose by 1.8 per cent accelerating to a 2.3 per cent gain in the first seven weeks of the new financial year.

The board has recommended a final dividend of 5p per share, giving a full-year payout of 7.5p.

However, M&B added: “We do not expect to declare an interim dividend in the current financial year but will make an assessment of pay-out at the end of the year based on a full year of trading and development of the sector outlook.” Chief executive Phil Urban told investors: “This year, we have continued to make progress on our three priority areas: building a more balanced business; instilling a more commercial culture; and driving an innovation agenda.

“This has resulted in a period of strong operational achievement for Mitchells & Butlers with a sustained return to like-for-like sales growth driving market outperformance.”

He added: “Cost headwinds across the industry have adversely affected margins but we continue to work hard to mitigate as much of these as possible through our focus on efficiency and profitable sales growth.

“Overall, we believe that the progress we have made this year positions the company well to deliver long-term shareholder value.”

Shares in M&B came under pressure as investors reacted to the news that inflationary pressures were eating into margins.

Analysts at Numis Securities highlighted “solid trading” at the group but pointed to the doubts over the dividend and general trading outlook.

They noted: “We are cautious on the outlook for M&B as we do not expect life-for-like sales to cover mounting cost headwinds and believe the risk of a dividend cut underlines the challenges facing managed pub groups.”

Mike van Dulken, head of research at Accendo Markets, said: “Even if Q4 was hurt by disappointing weather, and things have picked up since (sales +2.3 per pent), investors are clearly focusing on cost issues affecting the whole industry.

“These include the living wage, business rates, apprenticeship levy, sugar tax, restaurant discounting, changes in consumer habits (eating out less frequently, but spending more) and Brexit uncertainty.

“An early decision not to pay an interim dividend, pending a year-end assessment, also suggests a murky outlook that is sapping management confidence. All of which easily eclipses sales growth, improved cash flow and lower net debt as the pub group focuses on efficiency.”

M&B’s estate comprises more than 1,750 pubs and restaurants, of which more than 80 per cent are freehold or long-leasehold. It noted strong sales at Miller & Carter.